Holden eyes untapped billions in govt funds

Holden is eyeing a greater share of a $3.3 billion pool of taxpayer funds to continue manufacturing in Australia — despite receiving $1.8 billion over the past 12 years. The automotive giant will make a new application for financial assistance after the Federal election if its factory workers agree to new wages and conditions in a vote next Tuesday, according to industry sources.

The money is stored in the Automotive Transformation Scheme which set aside $2.347 billion from 2011 to 2015 and a further $1 billion from 2016 to 2020 to assist car manufacturers and suppliers.

There is an estimated $1.38 billion left in the $2.347 billion in the 2015 bracket alone. Budget documents show about $967 million has been allocated to car makers and suppliers since 2011.

Holden is banking on there being a surplus in the scheme given that the output of local car makers was higher when the current terms of the ATS agreement were negotiated in 2009 — and Ford’s factory shutdowns in 2016 will also make more funds available.

Ford will still be eligible for some assistance from the ATS for its design, research and engineering divisions that will remain in Australia after its factories close.

But Ford’s allocation from the ATS will be greatly diminished because the pool of funds for such automotive industries is minuscule compared to manufacturers. The calculations of the ATS benefit are complicated and take into account vehicle output and the level of investment but it is estimated to subsidise about $2300 per car.

Holden has already received $1.8 billion in taxpayer funds over the past 12 years — more than each of the other two manufacturers Toyota and Ford — including a $275 million injection which, 18 months ago, Holden said would secure its manufacturing future to 2022.

It is not yet clear how much extra money Holden will request from the ATS but News Corp understands it could be up to $275 million — equal to the amount it has already been pledged. Holden says market conditions have changed significantly in the past 18 months and the strong Australian dollar had diminished its export potential while creating greater competition from cheaper imports.

The limited export opportunity for Holden is a significant hurdle because the leader of the Federal Opposition, Tony Abbott, says he would support the car industry providing it can export vehicles to assist with local production volumes.

“I’ve said that I am absolutely committed to try to ensure the motor industry has a strong future and certainly we support ongoing assistance to the motor industry,” Mr Abbott told ABC Radio. “Two things have got to happen though. The industry itself has got to become more efficient, and we will help to do that by abolishing the carbon tax. The other thing they’ve got to do is get exports up (and) I will be talking with Holden about a stronger export strategy.”

However, the Cruze small car that Holden makes locally is also made in eight other countries including China, South Korea and Thailand, which can build each car for $2700 less than it costs Holden. The still-secret 2017 sedan that Holden will call a Commodore will also be made in other countries, including what might be considered export destinations. Toyota, the biggest exporter of vehicles in Australia, loses about $2500 on each car it builds because of unfavourable exchange rates.

SA Labor premier Jay Weatherill called on the Federal Liberal leader Mr Abbott to make its automotive industry policies clear so that Holden workers could decide on how to vote. “Tony Abbott owes it to those families to tell us where the Liberal party stands on the future of Holden,” Mr Weatherill said on Adelaide radio. “These workers are being asked to make a contribution but it all might be for nothing if a Coalition Government is elected and they refuse to make their investment to secure the future of Holden.”

This reporter is on Twitter: @JoshuaDowling

Sales of Australian-made cars:

2013: 111,838*
2012: 139,796
2011: 141,939
2010: 146,314
2009: 147,401
2008: 171,432
2007: 200,485

Source: Federal Chamber of Automotive Industries

* Forecast based on 20 per cent sales decline in first seven months of 2013